Cash In Hand

March 19, 2002

Homestore To Get $130 Million For ConsumerInfo.com

Marcie Geffner Inman News Features

Homestore.com this morning announced the sale of another asset?the ConsumerInfo.com business unit of iPlace. The sale is in line with Homestore?s efforts to strengthen its business model, but the move raises capital at the expense of cash flow and faces a potential stumbling block in the form of a pending legal action by MemberWorks.

Homestore CEO Mike Long said the $130 million cash deal with Experian is consistent with Homestore?s objective of focusing on its "primary business objective?making real estate professionals more productive and profitable."

ConsumerInfo had been a positive contributor to Homestore?s cash flow, which means the sale increases cash in hand now at the expense of cash coming in the door in the months and years to come. Homestore said today it expects to generate positive cash flow from operations by the end of this year, but as a result of the sale the company no longer is projecting positive cash flow from operations for the year overall.

A Homestore statement said the net proceeds will substantially strengthen the company?s balance sheet. Company spokesperson Dan Wool added that the funds will be used primarily for ongoing operations and investments in customer needs.

Homestore acquired ConsumerInfo.com in August as part of a $151 million purchase of iPlace, which was created in February 2000 when ConsumerInfo merged with eNeighborhoods and QSpace. Homestore last month sold the eNeighborhoods part of the package to Siegel Enterprises for an undisclosed price.

But Stamford, Conn.-based MemberWorks earlier this month filed a motion for a temporary restraining order and other legal remedies in an effort to stop Homestore from selling any of the iPlace-related assets.

MemberWorks alleges that Homestore neglected to file a registration statement with the Securities Exchange Commission for approximately $36 million of Homestore stock that was a substantial portion of the consideration Homestore paid MemberWorks for its equity interest in iPlace. MemberWorks said it hasn?t been able to sell any of the Homestore shares because they aren?t registered. The shares were worth about $22 each at the time Homestore acquired iPlace, but were trading slightly below $2 a share this afternoon.

Wool said the company doesn?t comment on pending litigation, but doesn?t believe MemberWorks will be able to block the asset sales.

The sale of ConsumerInfo.com is subject to customary closing conditions, including clearance by the Federal Trade Commission and the U.S. Justice Department under The Clayton Act?s Hart-Scott-Rodino provisions, which require parties to any merger larger than $50 million to provide prior notice to the FTC and Justice department, then wait a preset number of days before consummating the merger.

Homestore operates Realtor.com, an official Web site of the National Association of Realtors, HomeBuilder.com, an official Web site of the National Association of Home Builders, Homestore.com Apartments & Rentals and Homestore.com, a home information resource.